Military Radar Market - Strong Demand for Electronic Components

Following a sustained period of growth, overall defense expenditure is expected to flatten out over the next ten years. Global defense expenditure was estimated at $1.7 trillion in 2012 and will show an estimated growth of just 0.2% through 2022. While global expenditure will remain flat, individual regional trends are seeing some varying dynamics. North America, led primarily by the US, has led global expenditure on defense as the primary contributor to coalition action in theatres such as Iraq and Afghanistan. As these conflicts are drawn to a close, the US is expected to reduce spending on military budgets. In some respects, this follows a spending pattern seen at the end of other major conflicts. However, the current budgetary and economic constraints being faced in the US suggest that spending in the military segment will see a potentially sharper decline than in previous cycles.

Spending in Europe is also expected to remain flat over the 2012 – 2022 timeframe with individual national priorities shifting towards pooling resources to maintain capabilities, while maintaining sovereign capabilities where necessary. It remains to be seen whether disclosures regarding NSA activities in Europe will translate to a more concerted effort amongst European countries to prioritize defense expenditure. Countries are also looking to develop indigenous capabilities with Turkey being one example in this area.

Flush with revenues from the energy sector, defense spending in Russia is expected to increase with a more nationalistic outlook looking to revive a neglected military industrial complex and develop platforms that can compete against US capabilities in areas such as fast-jets, for example, as well as regain momentum behind international exports.

Defense expenditure in the MEA region is expected also to increase with individual expenditure in countries such as Israel, Saudi Arabia and other Middle Eastern countries providing opportunities across all the major domains with an emphasis on obtaining the leading edge in terms of platforms and associated capabilities. The CALA region is also expected to see growth with Brazil expected to lead the charge in developing home grown capabilities and joined by other nations across the region.

The largest growth in defense expenditure is expected to come from Asia-Pacific. The expected growth in Chinese expenditure will be joined by other nations such as India, Japan and South Korea looking to offset the potential challenge from China as well as responding to other regional conflicts. This will be coupled with a desire to upgrade and/or develop capabilities across the military domains to maintain operational parity with leading edge systems from North America. Some of this capability will be achieved through the US FMS (Foreign Military Sales) program while also looking to develop in-house capabilities.

Military radar expenditure comprises hardware as well as systems support, upgrades, operational and maintenance costs and other related services. Strategy Analytics estimates that overall military radar expenditure accounts for less than 1% of global defense expenditures.

The overall expenditure profile for military radar will show a decline over the 2012-2013 timeframe as a result of defense budget tightening. However, the emergence of new platforms, retrofitting existing platforms with new technologies as well as general maintenance of systems across land, air and naval domains will lead to overall expenditure increasing moving forward. Military radar expenditure will grow at a CAGR (compound annual growth rate) of 0.5% for the duration of the forecast timeframe, from $14.9 billion in 2012 to $15.2 billion by 2017 and $15.8 billion in 2022.

The North American region will drive the bulk of expenditure with high profile US-based platforms such as the F-35, the DDG naval platforms and the potential Space Fence program as well as emerging demand from unmanned platforms as the mission envelope for these systems expands with additional capabilities. Platforms such as the F-35 will also drive demand for military radar expenditure with international sales driving demand for new radar systems as well as the move to retrofit earlier generation platforms with similar radar technology. Military radar expenditure from North America is expected to account for over 48% of the global military radar spend in 2022.

The Asia-Pacific region will account for the second largest expenditure of military radar driven by internal capability development as well as acquisition of platforms and radar systems to maintain competencies against both regional and international challenges. Overall expenditure on military radar systems in this region will grow from $2.6 billion to $4.5 billion over a ten year timeframe.

Military radar shipments will grow at a CAGR of 5.4% through 2022 with the equivalent market for electronic components growing at a CAGR of 13.6%. Market growth will be driven by the move towards AESA-based systems providing both ongoing growth opportunities for GaAs-based systems as well as seeding growth for GaN technology.

GaAs is an established technology for the military sector and has driven the early implementation of AESA-based radars; GaN is still an emerging technology in the radar sector but is seeing opportunities for growth on two fronts. The technology provides an evolutionary increase in performance for AESA-based systems and will be used to upgrade existing AESA systems in the future as well as being used in new AESA systems bypassing GaAs altogether. On a secondary front, GaN-based transmitters will be used to displace existing tube technology based transmitter power supplies in existing and future radar systems. Silicon-based electronics will dominate demand with continued use in the RF front-end supplemented by the move towards increased digital processing requirements as a result of the move towards AESA-based systems. While the penetration of tube-based technologies such as TWTs will decline with emerging platforms based on AESA solutions, there will remain continued use of TWTs across all radar platforms. This will be in the form of supporting existing legacy systems, upgrades and repair/maintenance of existing systems and in some cases, the simple fact that the capabilities offered by AESA-based systems are either not required or prove too costly for the required mission.

The emergence of new platforms, retrofitting existing platforms with new technologies as well as general maintenance of systems across land, air and naval domains will lead to overall military radar expenditure increasing moving forward. The subsequent market for military radar electronics will be driven by the move towards AESA-based systems spurring growth in particular for GaN technology over the next ten years.

Strategy Analytics ADS service newly released series of military radar forecasts outline global defense expenditure trends segmented on a regional basis before breaking out the expected spend on military radar incorporating systems, hardware, support and related services across the land, air and naval domains.